Other Things the Same, an Increase in the Interest Rate

question 60

Multiple Choice

Other things the same, an increase in the interest rate makes the quantity of loanable funds demanded

• A)rise, and investment spending rise.
• B)rise, and investment spending fall.
• C)fall, and investment spending rise.
• D)fall, and investment spending fall.

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Definitions:

Factor Prices

The prices of the inputs used in the production process, such as labor and capital.

Production Function

An equation that specifies the output that a firm can produce with varying combinations of inputs, such as labor and capital.

Supply Function

A mathematical relationship that describes the quantity of goods that producers are willing and able to sell at different prices.

Cost Function

A mathematical formula used to calculate the total cost incurred by a company to produce a given level of output.